South African Revenue Service

Strategic PlanStrategic Plan2009/10 – 2011/12

Presented by Act. Commissioner:Oupa MagashulaOupa Magashula23 June 2009

Agenda

1. Overview

2. Performance Highlights 2008 / 09

3 Strategic Plan Update3. Strategic Plan Update

4. Impact of current crisisp

5. SARS response

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“In the face of the economic downturn, we will have to act prudently - no wastage, no roll-overs of funds - every cent must be spent wisely and fruitfully. The economic downturn will affect the pace at which our country is able to address the social and economic challenges it faces. But it will not alter the gdirection of our development.”

“W h ll t t d d t f lt i d i t“We shall not rest, and we dare not falter, in our drive to eradicate poverty.”

P id t f th R bli f S th Af i J b G dl ihl ki ZPresident of the Republic of South Africa : Jacob Gedleyihlekisa Zuma -State of the Nation Address June 2009

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SARS OverviewSARS Overview

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SARS Mandate

In terms of the South African Revenue Service (SARS) Act (no 34 of 1997) SARSService (SARS) Act (no. 34 of 1997), SARS is mandated to:

• Collect all revenues due• Ensure compliance with tax and customs

legislation• Protect our borders and facilitate trade

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Main Tax Types

• Personal Income Tax Corporate Income Tax• Corporate Income Tax

• Provisional tax• Secondary Tax on Companies• Turnover Tax• Value Added Tax• Excise Duties• Excise Duties• Customs Duties

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Elements of SARS Functions

Engage

Customer Interface

Queries,Communication

andComplaints

Inspect,Examine,Audit

Legal Rulings

EducateChannels

Telephone

Registration/Licensing

Accounts

P t

Debt Collection

InvestigateTrade 

Face‐to ‐face,Electronic, 

Fax ,Post

Filing

Payments, Refunds & Receipts

Investigate

Objections and Appeals

Facilitation & Border 

Inspection

Risk Profiling Assessing Litigation

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Performance Highlights2008/092008/09

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Revenue

Revenue growth from R184b to R625b over• Revenue growth from R184b to R625b over past 10 years (CAGR ~ 13%)

• Revenue increased from R572.8b (07/08) to R625 b (08/09)

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Modernisation Highlights

• Modernized personal income taxp• Employer filing season implemented and

linked with individual filinglinked with individual filing• Introduced new risk engine and automated

case management systemcase management system• Initiated Customs modernisation programme

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Impact of Modernisation on Process EfficiencyEfficiency

Metric 2004 – 2006(1st 3 years)

2007 – 2009(2nd 3 years)(1st 3 years) (2nd 3 years)

Registered users ±500k ±5m

N b f t ±1 5 ±7Number of returns ±1.5m p.a. ±7m p.a.

% of eFiled returns to total returns ±8% ±44%

Value of Assessment processed via eFiling ±R100bn ±R382bn

Payments processed via Filli

±R55bn ±R343bneFilling% Payments to Total Revenue

±13% ±55%

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Impact of Modernisation on Service

• Pre-populated PIT form achieved CustomerPre populated PIT form achieved Customer satisfaction rating of 86.9%

• Paper return volumes declined by 74%

• Average turnaround of PIT assessments• Average turnaround of PIT assessments from 1% within 48 hours to 63% within 24 hourshours

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Improved Compliance

• 31% improvement on PAYE submissions31% improvement on PAYE submissions

• 518 guilty verdicts attained

• 73k audits - average yield of ~ R70k per casecase

• R13.4b debt collected

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Customs

• 7 951 anti-smuggling seizures

• 731 counterfeit goods seizures to the value of R379 millionof R379 million

• R 2bn value of illicit tobacco and cigarettes out of economy

• Mobile X-ray container scanner deployed at• Mobile X-ray container scanner deployed at the Durban Container Terminal

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In 2007/08 SARS submitted a new 5- 7 year Strategic Plan that:y g

• Reconfirmed our seven strategic objectives• Reconfirmed our seven strategic objectives• Introduced a modernization agenda

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Our Philosophy

Slim the middle

+Slim the middle

Segmentation

Underpinned by our leadership Model

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Strategic Approach informing ModernisationSouth

2011/1 African Revenue Serv

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vice Strategic Plan 2009/10 –

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Segmentation of Taxpayer and Trader Base

Segments in customer base

Agents &  Businesses and S i l

gintermediaries

1 Tax practitioners

Individuals

3 Complex

SOEs

6 Large

Special

9. NGOs, PBOs, 1.  Tax practitioners

2. Trade intermediaries

3. Complex

4. Standard

6. Large

7. Medium

government departments

10. Employer as agent

5. SITE and below threshold

8. Micro to small

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Leadership Model

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Strategic Objectives

1. Optimising revenue and compliance

2 B tt t d t d i2. Better taxpayer and trader experience

3. Compliance and reducing risksp g

4. Enhance human capacity

5. Trader facilitation and border security

6 Operational efficiency6. Operational efficiency

7. Good governanceg

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Initial Modernisation Focus Areas

Service improving customer service outreachService improving customer service outreachService – improving customer service, outreach Service – improving customer service, outreach 

Risk – developing an integrated risk  management and enforcement systemRisk – developing an integrated risk  management and enforcement systemand enforcement systemand enforcement system

Operations – enhancing core operations and building capabilitiesOperations – enhancing core operations and building capabilities

Customs – strengthening border control at ports of entryCustoms – strengthening border control at ports of entry

Support ‐ support initiatives that reinforce core support systemsSupport ‐ support initiatives that reinforce core support systems

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Since formulating the Strategic Plan South Africa is in a recessionSouth Africa is in a recession therefore we have developed new responses

• The extent of the current financial crisis has been more severe than initially anticipated

• Collecting the R659 billion tax revenues will be significantly affectedbe significantly affected

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RESPONSE TO DECLINING REVENUESS O S O C G U S

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International responses

• USA – 10 000 extra auditors

• Ireland & UK - hiring merchant bankers who have become surplushave become surplus

• France & Belgium – accelerate VAT refunds

• Malaysia – measures to bolster capacity• OECD strong focus on tax havens• OECD – strong focus on tax havens

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SARS Response• Strengthen our enterprise-wide revenue

management capability and develop initiatives to yield additional revenueyield additional revenue

• Strengthen our risk management and audit capacity • Intensified focus and audit on high-net worthIntensified focus and audit on high net worth

individuals• Large businesses Centre to focus on aspects such

as aggressive tax planning transfer pricing offas aggressive tax planning, transfer pricing, off-shore arrangements & trusts

• Employ additional experts to unravel tax schemesp y p• Provide voluntary disclosure opportunity for non-

compliant tax entities

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Priorities and deliverables

• SARS table new Chapter 6 to reflect above priorities and deliverables

• 11 Priorities with specific deliverables set out• 11 Priorities with specific deliverables set out in Chapter 6

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Resource PlanProjected revenue and expenditure from 2009/10 to 2011/12

South

2011/1 African Revenue Serv

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vice Strategic Plan 2009/10 –

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Resource Plan Continued...Human resource figures and projected head count over the following two years

South

2011/1 African Revenue Serv

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vice Strategic Plan 2009/10 –

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Cost as a percentage of Tax Revenue Collected

1 20%

1.40%

800.0

900.0

1.00%

1.20%

600.0

700.0

0.60%

0.80%

400.0

500.0

Tax Revenue Collected

Cost as a % of tax revenue

0.20%

0.40%

100 0

200.0

300.0

0.00%-

100.0

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12

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Thank youThank you

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QuestionsQuestions

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Back-up slidesp

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Corporate strategic priorities 2009/101. Secure the revenue Activities supporting Priority 1:

In 2009/10 SARS will:

• Define a specific revenue management programme

• Enhance understanding of compliance gap

• Focus on provisional payments of medium businesses

Implementation of Turnover (Presumptive) tax for micro businesses• Implementation of Turnover (Presumptive) tax for micro businesses•Develop legislation to enhance SARS administrative capabilities and collection

mechanisms• Scale up electronic payments systems• Scale up electronic payments systems

• Ensure enhancement of SARS reputation as a tax and customs administration

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Corporate strategic priorities 2009/102 Strengthen Compliance2. Strengthen Compliance Activities supporting Priority 2:

In 2009/10 SARS will:• Develop a compliance programme

• Work on compliance risk rules and engines g

• Improve the completeness, currency and integrity of the tax and trader register

• Simplify registration and facilitate single registration

• Focus on repositioning and equipping the Large Business Centre• Focus on repositioning and equipping the Large Business Centre

• Tighten VAT registration

• Encourage compliance through implementing systems for administrative penalties

• Focus on the management of debt and the reduction of outstanding returns

• Develop and implement integrated enforcement case management and tracking

• Improve detection of and enhance response to commercial fraud

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Corporate strategic priorities 2009/10

Activities supporting Priority 3:

3. Improve border protection and management

pp g y

In 2009/10 SARS will:

• Contribute towards government’s strategy for a border management agency• Contribute towards government s strategy for a border management agency

• Prepare and implement measure for the Confederations Cup in 2009

• Prepare for World Cup 2010Prepare for World Cup 2010

• Modernise customs’ business processes and technology systems

• Enhance human capacityp y

• Streamline customs operations

• Address accreditation and trader registration

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Corporate strategic priorities 2009/104. Improve operations management and productivity

Activities supporting Priority 4:

In 2009/10 SARS will:

• Develop a standard measurement and monitoring backbone

• Promote the use of electronic channels for all interactions with taxpayers

• Develop tools enabling efficiency gains

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Corporate strategic priorities 2009/10

Activities supporting Priority 5:

5. Ensure improved service

In 2009/10 SARS will:• Work together with other government role players towards a single integrated business

registration system

• Revise SARS service and channel strategy

C ti f i d li th h i d t t t f iliti• Continue focus on service delivery through improved contact centre facilities

• Update SARS service standards

• Develop differentiated service offeringsp g

• Speed up resolution of service queries and complaints

• Enhance skill level of staff

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Corporate strategic priorities 2009/10

6. Fix the basic legacy systems

Activities supporting Priority 6:

In 2009/10 SARS will:

• Clean existing records in taxpayer and trader register

• Develop new processes and systems for registration

• Clean taxpayer account information

• Develop an account management system

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Corporate strategic priorities 2009/107 Improve governance

Activities supporting Priority 7:

7. Improve governance

In 2009/10 SARS will:

• Implement an early warning system for governance risk and compliance

• Extend implementation of Enterprise Risk Management

• Enhance regulatory and business compliance

• Improve information security

• Improve physical security

• Prepare for the implementation of Generally Recognised Accounting Principles

(GRAP)

• Develop an integrity promotion framework and plan• Develop an integrity promotion framework and plan

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Corporate strategic priorities 2009/108 D l h bilit

Activities supporting Priority 8:

8. Develop human capability

In 2009/10 SARS will:

• Implement a Human Capital Planning System and process

• Implement a Learning and Development Strategy

• Implement a focused Leadership Development process

• Implement an Inclusive Employer Value Proposition

• Transform culture by embedding SARS values

• Enhance Human Resource Information Systems

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Corporate strategic priorities 2009/10

Activities supporting Priority 9:

9. Proceed with modernisation

In 2009/10 SARS will:• Further improve both PAYE and PIT systems

• Continue to focus on service delivery through improved contact centre facilities

• Commence the multi- year customs modernisation programme

B ild hi d th l t t i th Ri k P• Build on successes achieved over the last two years in the Risk Programme

• Increase use of third party data

• Develop systems for more effective management of taxpayer and trader accounts and p y g p y

payments

• Modernise other business tax systems

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Corporate strategic priorities 2009/10

Activities supporting Priority 10:

10. Pursue segmentation strategy

In 2009/10 SARS will:

• Continue segmentation research

• Develop more focused enforcement interventions

• Establish customer segment units

• A new business model for the Large Business Centre

• Develop and launch focused compliance programme for High Net Worth

Individuals in a dedicated unit

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Corporate strategic priorities 2009/10C

Activities supporting Priority 11:

11. Consolidate the new operating model

In 2009/10 SARS will:

• Develop a standard measurement and monitoring backbonep g

• Continue to institutionalise the new operating model

• Complete people placement against the leadership model in alignment with new

operating model

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